Working capital

Question 1

Working capital

Answer 1

The total of the current assets of a business less its current liabilities

Question 2

Current ratio

Answer 2

Current assets ÷ current liabilities

Question 3

Quick ratio

Answer 3

Current assets less inventories ÷ current liabilities

Question 4

Cash operating cycle

Answer 4

The period of time which elapses between the point at which cash begins to be spent on the production of a product and the collection of cash from the customer who purchases it.

Question 5

Opportunity cost

Answer 5

The value of the benefit sacrificed when one course of action is chosen in
preference to an alternative

Question 6

Invoice discounting

Answer 6

The purchase of a company’s trade debts, at a discount

Question 7

Factoring organisation

Answer 7

Takes over the management of the trade debts owed to its client on the client’s behalf

Question 8

Cash budget

Answer 8

A cash budget is a statement in which estimated future cash receipts and payments are
tabulated in such a way as to show the forecast cash balance of a business at defined intervals